How to price Your Shipping
Merchants often overlook shipping when setting up shop, which can end up losing them money. So how to price your shipping effectively? It’s daunting, can be overwhelming, and there are many variables at play for each order placed. The main variables being your location, your customer’s location, what is being shipped, packing materials, and handling costs. Then add to that your company size, the number of SKUs, oddly shaped and fragile items, and it’s easy to understand why many choose to sweep it under the rug. At Intuitive Shipping, as the name suggests, we want to simplify the process for merchants and bring shipping into the limelight as a game-changer in the e-commerce space. To help, we’ve broken down the various ways you can price your shipping.
1. Live Rates
Your customer pays the actual cost of shipping; it’s transparent and fair for both parties and ensures predictable profits. This is generally the option favoured by small businesses, those in their first year or small makers on Etsy, etc. Consumers are happy to pay shipping costs when they know they are supporting a local or small enterprise. The downside to this option is that shipping costs can often be prohibitive if the cost to ship is more than the cost of the item being purchased.
2. Flat Rates
Using flat rates as a method of pricing is beneficial for established online retailers with a lot of product SKUs. Using their existing data, merchants can determine the average shipping costs for products to identify their rate. It is important to note that shipping cost anomalies (i.e. a customer from Australia whose shipping cost was $150) should be removed from the data set to determine a clear representation of the average price.
Analyzing data to determine frequently purchased items and common cart combinations can also be useful to offset your shipping costs. If using flat rates, it is also advisable to add different controls for certain items, such as a surcharge for fragile items.
3. “Free” Shipping
There’s no such thing as a free lunch, and there’s no such thing as free shipping. Here, the customer pays for the shipping without knowing they have by offsetting the shipping cost in the purchase price. This method is suitable for stores that offer a small or consistently sized product line.
Best practice is to add a minimum spend to qualify for free shipping as, without it, there will be a negative impact of units per transaction. For greater transparency, we would advise using language such as ‘shipping included’ rather than ‘free’ as this can sometimes result in price discrepancies between in-store and online items, which can be frustrating for consumers.